Slight fixed-rate drop a boost to Calgary homebuyers

Affordability remains a challenge – but the recent downturn in fixed rates has been a positive development

Slight fixed-rate drop a boost to Calgary homebuyers

Calgary has been among the outliers of Canada’s housing markets in 2023, continuing to sizzle amid slowdowns elsewhere – and that’s a trend that shows little sign of fading as the year nears an end.

Home sales in the city were slower in October than the previous month as expected, in line with typical patterns for the end of the year. Still, sales levels spiked by 17% compared with the same time last year, with 2,171 units changing hands as apartment condominiums saw a surge in interest.

Ominously, average prices are also rising rapidly across Calgary, according to data from the city’s real estate board. At $571,600, the total average residential price was 9.7% higher than October 2022, while row prices jumped by 19.2% on average compared with the same time last year and apartments saw a 16.1% yearly uptick.

That’s been spurred in part by a big drop in housing supply. At 3,190 units, available inventory in October was 18% lower than the same time last year, even despite new listings rising noticeably – by 23.7% on a yearly basis.

Still, some good news has arrived for buyers based in the province with a drop in five-year Government of Canada bond yields in recent weeks, with that measure – which leads fixed mortgage rates in Canada – having declined precipitously since the middle of October.

Calgary-based broker Max Singh (pictured top), of TMG The Mortgage Group, told Canadian Mortgage Professional that while climbing bond yields since March had put a significant dent in affordability for would-be buyers, their dip since last month had improved the picture at least slightly on the mortgage front.

“It’s still elevated in comparison to what it was previously sitting at, but it’s rather steady,” he said. “It’s signalling to lenders to start declining interest rates.

“As little as a week ago or two weeks ago, a five-year fixed insured mortgage was around 5.81%. It’s now being offered at around 5.54% and trending in the right direction.”

High competition, bidding wars remain fixtures of Calgary market

Even a slight downward trend in fixed rates is a welcome sign for borrowers, with brokers able to adjust the amount they can afford as a result of the changes.

“In a scenario of 5.81%, we’re qualifying them at 7.81%. Now, we’re qualifying them at 7.54%. So that’s a [sizeable] decline in what we’re qualifying the mortgage number at, which is resulting in greater affordability and helps compensate for rising property values and a competitive bidding environment,” Singh said. “So declining interest rates as a whole are a wonderful gift to Canadian consumers across the country.”

That’s particularly important because although sales activity has moderated on a month-over-month basis, competition and bidding wars are still features of the Calgary market due to the lack of inventory.

Singh said that he’s gearing up for a busy December, with plenty of buyers still in the hunt for a purchase despite the typical seasonal cooldown.

“Specifically with the Calgary market being such a busy one at present, those buyers need that extra bump [from lower rates] in a competitive bidding environment,” he said. “It gives us a little bit more affordability and allows that client a little extra room to help close that transaction.

“And even in some of the live transactions that we presently have, we can go back in and reprice clients’ approval with lenders allowing us to float down the interest rate. We go to the lender and request new pricing based upon their current market offering. Some lenders allow us to do that an unlimited amount of times, and some lenders allow us to do it once before funding.”

What’s the outlook in other parts of the country?

The national housing market is currently gripped by a protracted cooldown, with Ontario leading the charge in slower activity, according to RBC Economics.  

The province has seen home sales fall for five consecutive months, with others seeing a less striking but still noteworthy cooldown. “Even super-hot Alberta is showing early signs of softening,” RBC’s assistant chief economist Robert Hogue said, “with resales falling 8.3% month over month in October.”

What’s more, prices are on the up across most parts of the country. While British Columbia saw its first decline for seven months, “prices continue to rise in the majority of provinces,” Hogue said, “including Alberta, Saskatchewan, Quebec, and most Atlantic provinces.”

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